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Thursday, July 28, 2011

Today here at the International Food Policy Research Institute in Washington, DC, I spoke by phone with a German reporter who wanted to interview someone about the statement this morning by the German government's Africa adviser Guenter Nooke who allegedly blamed Chinese land buys for the drought in the Horn of Africa.

I'm glad the reporter was from a radio station; he couldn't see my jaw drop. Yes, land grabs are bad news for small farmers in Ethiopia. But does China even have agricultural investments in Ethiopia? Not according to the newly released "land grab" studies by the progressive California-based Oakland Institute (whose head, Anuradha Mittal, used to be at Food First). The Oakland Institute actually conducted fieldwork on land grabs instead of looking only at media stories. Their June 2011 report on Ethiopia has this finding (which I do not think has been repeated anywhere by the media):

"While China is active in the mining and infrastructure development sectors, they were surprisingly absent from land investment deals. Recent evidence suggests that a Chinese company is poised* to sign a 25,000 ha concession to produce sugarcane in the Gambella region, and this company claimed to bethe first agricultural company from China (emphasis added)."

That's consistent with what I found across Africa (note: not necessarily the case for SE Asia or Latin America). It's also consistent with the findings of a 2009 FAO/IIED study of "land grabs" which said:

"A common external perception is that China is supporting Chinese enterprises to acquire land abroad as part of a national food security strategy. Yet the evidence for this is highly questionable."

So who has actually invested in Ethiopia? Well, the real story seems to be that it is Western hedge funds, among others. Here's Mittal's YouTube interview.

Tuesday, July 26, 2011

I'm disappointed that one of my favorite magazines, The Atlantic, published on June 24, 2011, a short and sloppy article by Max Fisher-- "In Zimbabwe, Chinese Investment with Hints of Colonialism." This is a striking example of some of the superficial, error-ridden, and at times irresponsible China-Africa
analysis that a major magazine can casually publish. Articles like this -- apparently dashed together out of a quick spin through the internet -- are all that America's elite opinion makers are likely to read about China's role in Africa. That's a pity.

Fisher doesn't much care for Mugabe and neither do I. Mugabe is an appalling leader. His policies over the past decade have driven his country into the ground. His refusal to relinquish power in legitimate elections has been devastating for Zimbabweans.

Fisher also highlights concerns by Zimbabwean construction workers, restaurant staff, and labor unions about Chinese employers: these are no doubt a reality: Chinese managers have a well-deserved reputation for poor working conditions. Sadly, there's no news in these claims, which have been voiced often in African and international media (and which form the centerpiece of a good edited volume published in Namibia by the trade union movement).

Fisher ignored something that was interesting and new: the complaints by Zimbabwe's trade unions were taken seriously by the Chinese who sent a delegation in response. As Veneranda Langa reports from Harare, after the labor problems hit the media, the Chinese government reacted:

A high-level delegation from the Overseas Chinese Affairs Committee (OCC) of the National People’s Congress of China is in Zimbabwe [June 13, 2011] to hold seminars to encourage Chinese nationals to live harmoniously with locals in an effort to boost relations between the two countries.

As for the low salaries, also undoubtedly true -- but the union complaint that that some Chinese companies pay only $4 a day (about $120 a month for a five day week) as wages has to be seen in the context where statutory minimum wage figures in 2009 were $100/month for mining, $150/month for government workers, or $30/month for domestics. (Zimbabwe has no overall minimum wage, only minimum wages for different sectors; these are re-negotiated regularly.)

But let's look at some of Fisher's other claims:

China has won "near-exclusive dominance of everything from mineral rights to labor standards" ...

These claims about exclusive access to mineral rights would come as a surprise to the many international mining firms that have ongoing mineral investments in Zimbabwe, particularly those with extensive investment in the platinum sector, including Canada's Caledonia, and Impala Platinum (the South African firm that is the major shareholder of Zimplats) as well as the mining giant Anglo-American.

It's my guess that discussions of a $3 billion line of credit offer (not a contract or concluded deal) appear to be real -- a line of credit has been under discussion since 2006 but there have been many sticking points. However, if this happens, it would clearly not be a "swap" of $3 billion for "all of Zimbabwe's platinum", but rather a resource-secured line of credit linked to a platinum deposit like the one that was earlier encumbered for another Chinese loan. This bears some similarity to the DRC's copper "deal of the century".

Well, he does seem to get treatment in Singapore -- he's been six times recently. But isn't this stretching it a bit in an article on "Chinese colonialism"?

Fisher also gives us an alarmist interpretation of a complicated and politically controversial project:

A massive military compound is under construction in Harare, built by Chinese firms and with a Chinese loan of $98 million. The open-ended loan, which the already indebted Zimbabwean government has no obvious way of paying back, means that this component of the country's military will be effectively Chinese-owned ... the expensive facility will hand a small but important part of Zimbabwean sovereignty over to Chinese lenders.

Neglecting to mention that the "massive military compound" is actually the site of Zimbabwe's new National Defense College, Fisher puts a scary spin on something that is a tad more ordinary. (And why portray the signed loan as "open ended"?)
Here's the history of this project: In 2008, the Zimbabwe government/military decided to upgrade the Staff College run by the University of Zimbabwe, and enable it to have the capacity to offer a BA and MA degrees in Defense and Security Studies. But they didn't have the money to do this. So they negotiated an "obvious way to pay it back": secure a concessional loan from the China Eximbank with the future export of Zimbabwean resources from a joint venture between the Chinese construction company and the Zimbabwe government (again, this resembles the DRC copper/infrastructure model).

Using aid for a project like this is a good example of the downside of China's request-based aid (the package deal seems to have been cooked up between Anjin Corp and the Zimbabwe Defense forces) and Chinese deference to local ownership (i.e. the Unity government -- and Zimbabwe's Parliament, which ratified the deal) in making decisions on how to use aid finance. (I talk about these problems more in The Dragon's Gift).

Surely Zimbabwe has better uses for its diamonds than using them to pay to build the professionalism of its military. (And surely my own country, the US, has better uses for our money than paying for our military's desires... and yet still we do it, and ironically we also finance it by borrowing from the Chinese!). But rather than China now 'owning' part of Zimbabwe's military, China Eximbank will have a lien on part of the Marange diamond fields.

Fisher then moves into shakier territory with a couple more myths:

In 2006, China paid Mozambique $2 billion for a deal to dam off the Zambezi river and send 3,000 settlers to populate the valley, some of the country's most fertile land.

This Chinese "deal" for the Mpanda Nkua Dam on the Zambezi is another zombie myth that has cycled around the internet for nearly six years. When I went to Mozambique in 2009 to look into it, I found that although Chinese credit for a dam had been discussed, it was never finalized. When the contract was given to a Brazilian firm to build the dam in 2008, there was still no financing. There are no Chinese settlers in the Zambezi Valley, and no one I spoke to knew anything about this hypothesized plan. But why check when the truth might spoil a good story?

In a grand conclusion, Fisher widens his scope to the entire continent:

China is snatching up agricultural land across the continent, often with leases nearing a century in length.

Abstract: China’s development aid to Africa has increased rapidly, yet this might be the only fact on which we have widespread agreement when it comes to Chinese aid. Analysts disagree about the nature of China’s official development aid, the countries that are its main recipients, the reasons for providing aid, the quantity of official aid, and its impact. Why does this matter? Knowing more about Chinese development aid is important for understanding Chinese foreign policy and economic statecraft: how and to what ends does China use its government policy tools? It is also important for more accurate comparisons between Chinese practices and those of other donors and providers of finance. Finally, for those who are interested in the question of whether, as it rises, China will transform, reform or maintain the existing system of norms and rules (Kim 1999), development aid provides a particularly interesting case study. The rules and norms about foreign aid have been forged not by a global institution, but primarily by the Development Assistance Committee (DAC) of the Organisation for Economic Cooperation and Development (OECD)—a group of countries of which China is not a part. To answer questions about China’s impact on these rules and norms, we need to have a sound idea of what China is actually doing as a donor.

Abstract: China's official aid programme is non-transparent and poorly understood. The paper compares development finance from China and the Organization for Economic Co-operation Development (OECD) generally and through the examination of two cases of Chinese development cooperation in Africa. These cases illustrate a major argument of the paper: that the lion's share of China's officially supported finance is not actually official development assistance (ODA). China does provide finance that meets the definition of ODA, but this is relatively small. Export credits, non-concessional state loans or aid used to foster Chinese investment do not fall into the category of ODA. China's cooperation may be developmental, but it is not primarily based on official development aid. This suggests that the institutions established at the OECD to develop and apply standards for foreign aid (the Development Assistance Committee) may not be the right ones to govern these growing ties.

Tuesday, July 12, 2011

I"ve been in Australia since last Friday, participating in the launch of China Update 2011: Rising China, Challenges and Opportunitiesat Australia National University and having meetings with AUS government officials. It's fascinating how the Australians view their relationship with China, their major economic partner. As a resource-rich country, Australia has been the target of enthusiastic trade and investment interest by Chinese firms. It's been a politically contentious relationship, but Australia has by and large managed it very well (although one prominent Australian academic here called the govenment's new screening policy toward investment from 'state-owned enterprises' bumble-footed.)

Some Australians have moved up the ladder inside Chinese firms. Australian Andrew Michelmore, a former Rhodes Scholar, now the highest ranking foreigner working for China Minmetals Group, said in a July 4, 2011 interview with Businessweek:

The myth is that the [Chinese] government goes to company X and says, ‘Company X, I want you to go and buy that asset over there and pay whatever you want for it because we want it,’” said Michelmore, who won a gold medal at the 1974 World Rowing Championships. “Not at all,” he said in an interview in Hong Kong. “There is this incredible competition in China, they are businesspeople competing against each other.”:

What can Africans learn from the Australian approach to China? A lot, I imagine.

Wednesday, July 6, 2011

In a June 28, 2011 article with the thoughtful title: "China Supports Global Pariahs, Gets Resources and Criticism in Return," the United States' official broadcasting system Voice of America continued a series on China's overseas engagement. Here are some of the balanced analysts they're quoting: Greg Autry, co-author with Peter Navarro of the book Death by China and economics professor at University of California Irvine, and Peter Navarro, author of the polemic The Coming China Wars. Here's a sample of the analysis.

"Zimbabwe has everything from diamonds to tobacco and farm land," says Peter Navarro, an economics professor at the University of California, Irvine. "China has gone in there and there are a lot of Chinese farmers there now tilling Zimbabwean soil growing crops that are sent back to China while the people of Zimbabwe starve..."

Later on the article repeats another of the myths floating around the internet:

China International Water and Electric Company ... has lease holds on over a quarter of a million acres of land in southern Zimbabwe for the raising of maize, which it exports back to China.

This zombie of a story -- another of the "rural legends" floating around the internet (this one was launched in 2003) -- is hard to kill off. But it is bogus. (I explain what really happened in The Dragon's Gift). It's also been embellished. The original version claimed that CIWEC was producing maize for Zimbabweans. Now the VOA, without checking, "reports" that CIWEC is exporting food back to China while Zimbabweans starve.